PROFILE OF BRAZILIAN INTERNET MARKET 2006 - USAGE EXPANDS,

UNCLAS SECTION 01 OF 02 BRASILIA 001080 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECPS PGOV ECON EINT XM BR SUBJECT: PROFILE OF BRAZILIAN INTERNET MARKET 2006 - USAGE EXPANDS, COMMUNITIES GROW; MEDIA CONVERGE REFS: (A) SAO PAULO 216, (B) SAO PAULO 245 ¶1. SUMMARY: While overall usage rates remain relatively low - only 14 percent of the population use the internet - Brazilians are increasingly active online, in terms of the total internet user base, and how much time each of these users spends online. Social networking has become the most popular internet-based activity in Brazil but news content is also in increasing demand. Large media providers are responding with mature online products, and the U.S. Mission is enhancing its online presence. For its part, the Brazilian government is actively participating in the debate about global administration of the internet, including active advocacy of transferring control of dimain name issuange to an international body linked with the UN. The GOB is also taking an interest in issues related to the convergence of internet, broadcast and telecommunications media. END SUMMARY Background -------------- ¶2. As of December 2005 Brazil had 25,900,000 Internet users, or 14.1% of the population, according to IT market research company eTForecasts. Internet usage in Brazil has increased 346% over the past three years. The broadband internet audience is estimated at 66% of the total, most of whom are on ADSL lines. Cable broadband is available, but market penetration remains very low. Some 64% of internet users are in the middle and upper classes. Brazilian internet users spend on average 17 hours online each month, with some 65% of residential users surfing during TV prime time. Evidence suggests that the internet is replacing or augmenting TV as an entertainment medium. Broadband users are viewing videos, listening to music, playing online games and engaging in what has become a Brazilian cultural phenomenon - online communities. Online Social Networking Experiences Organic Growth -------------- -------------- ¶3. Social networking communities such as Orkut and Myspace.com have captured the imagination of Brazilian internet users over the past few years. According to IBOPE's NetRatings survey released in July 2005, such communities surpass e-mail as the most popular internet-based activity, with the average Brazilian internet user spending 20.5% of their online time on this activity - almost twice the amount of time they spend e-mailing. As a comparison, communities do not figure in the top five activities of the average U.S. internet user. ¶4. With such an active user base, social networking communities have grown organically in Brazil as members invite their friends and user networks expand dramatically. This phenomenon is most effectively demonstrated by the domination of Brazilian users of Google's online community Orkut. According to online encyclopedia Wikipedia, Brazilians now account for over 75% of Orkut users (U.S. users amount to less than 6%) - which has caused some in the U.S. to complain of a Portuguese language domination of the American-developed service. Domestic Portals Grow, while AOL stumbles -------------- ¶5. The top portal in Brazil is Universo Online (UOL),which was accessed by 63.7% of internet users aged 15-plus in August 2005. UOL reported 1.45 million paid subscribers in February 2006, of which 586 million are broadband users. UOL recorded a profit of R$266 million in 2005 - 875% higher than the year prior. In December 2005 UOL offered 20% of the company's stock on the Sao Paulo stock exchange, which was sold for R$555 million, suggesting a company value of over R$2.7 billion. ¶6. The second ranking portal in Brazil is Terra, which was accessed by 55.2% of internet users aged 15-plus in August 2005. U.S. company Yahoo!'s Portuguese language Brazil portal ranked third with 53% of users. Other U.S. content providers have not been so successful. AOL's Portuguese language Brazil service was closed March 17 after seven years of operation. The service had only 150,000 subscribers. Ref A. Brazilians seek news online in increasing numbers -------------- -------------- ¶7. As the Brazilian internet audience increases, demand for online news is expanding. A March 2006 Ibope/NetRatings survey revealed that online news websites are registering growth at twice the rate of the total internet audience in Brazil, with home-based internet users spending 56% of their time online accessing news websites. News outlets have been debating the role of the internet, and it now appears that Brazilian print media are largely adopting what they term the "hybrid model"; free-access, real-time, news service, but BRASILIA 00001080 002 OF 002 with paid access to the online version of the print product. Sao Paulo-based leading national dailies Folha and O Estado are already doing this, and leading Rio de Janeiro-based national Daily O Globo is expected to follow suit shortly. U.S. Government online presence -------------- ¶8. There is significant demand in Brazil for Portuguese language information from U.S. government sources. Mission Brazil's websites registered over 1.3 million visits in 2005. During the same period 45% of visits to the VOA Portuguese to Africa website originated from Brazil. ¶9. The Mission has leveraged the internet in order to increase its visibility and outreach across the continent-sized landmass of Brazil. Mission Brazil was the first in WHA to establish Virtual Presence Posts (VPPs). VPPs are designed to increase the frequency and effectiveness of engagement with regions where the USG does not maintain a traditional diplomatic presence. VPPs combine on-the-ground activities and media engagement with a branded web site that provides customized content about U.S. government activities in the region. Mission Brazil has five such VPPs, with plans to establish two more. As a measure of their effectiveness, visits to VPP websites have grown dramatically, with an average of over 4,000 monthly website visits in the first four months of 2006, compared to an average of 1,800 in the same period in 2005. ¶10. In response to the internet preferences of Brazilians, the Mission has developed several online community initiatives, the best example of which is for the Youth Ambassadors youth exchange program. In order to facilitate dialogue between program participants and alumni, the embassy established an online networking community. Mirroring the experience of larger networks such as Orkut, the service has proven to be extremely popular, and has taken a direction of its own. For instance, program alumni have recently started an online mentoring initiative for new grantees. ¶11. The Mission has also initiated an "Ask The Consul" feature which allows visitors to the Mission consular pages to submit questions. Initially the idea was to select one question each month for publication on the "Ask The Consul" page, with a response from the Consul. However, due to the immense popularity of the service, the consular section has taken to directly answering as many as 30 e-mails per day. Brazilian government and the internet -------------- ¶12. The Brazilian government has been at the forefront of efforts to reform control of the internet, currently managed by U.S. government entity ICANN (Internet Corporation for Assigned Names and Numbers). Brazil has proposed the creation of an autonomous, independent organization, affiliated to the United Nations and created by international treaty that would become responsible for, among other things, issuing top-level domains (.com, .net, .br, etc) and developing common standards for future web services as they evolve. Media Convergence -------------- ¶13. Another important area where the Brazilian government is involved is in the convergence of cell phone service with both the internet and digital TV. There are more than 80 million mobile phones activated in Brazil - a country where many communities are not served by land lines, and growing numbers of Brazilians are accessing news websites via these cellular phones. Additionally, telecom companies have been actively lobbying the Brazilian government as Brazil deliberates which of three competing digital TV standards to adopt, all of which offer some degree of mobility, or content delivery to mobile phones. Ref B. ¶14. COMMENT: Due to various geographical and societal factors, Brazil has widely embraced the internet. It has become a world leader in community-based online activities, and looks well-positioned to continue in audience growth and the convergence of broadcast, print and online media. END COMMENT. ¶15. In line with the Department's focus on transformational diplomacy and expanded outreach to key audiences, post will continue to monitor these trends, and will respond with post developed online communications products that cater to an ever expanding and increasingly sophisticated internet audience. CHICOLA